The weird thing about bubbles - you can’t look out

Maybe there is a lot of oxygen inside the bubble? In spite of the historical boom and bust of property and equity markets, people that are inside the bubble loose all sense of reality and view friendly advisors as antagonists.

Published 2015-10-26

It must be air

The thrilling and exiting thing about having sold your third apartment at a good profit is that the future looks fantastic. When your brain receives all the novel chemicals, produced by your new found happiness, it is scientifically not possible to get off the train. And at this point in time it is easy to make a historical mix-up: skill and luck.

In theory, everybody knows that the bubbles come and go regularly. In practise, just here and now, however, people feel that this time it is different. And people have done so for hundreds of years. If we can learn something from this it is that given enough success we can no longer make the clever decisions.

My eternal hero Professor Daniel Kahneman estimated that the cerebral forces connected to our subliminal forces are 200 000 times the size of our logic brain efforts. So is it even possible to get off a rising property bubble and softly land in the cold and evil reality. I think no. Which means it is up to friends and family (there are similarities to alcoholism) to pull their relation out of the mud.

The main argument for a continued bubble will always be the increasing demand. This is a good argument but the increasing supply, the ripples that starts with diminishing confidence in the economy and rising interest rates, is more powerful.

So all of you in the bubble: the reason you cannot see the world around you is that the bubble is tinted with emotions.

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